Sterling weakness following a disappointing batch of U.K. data provided the main movement in otherwise subdued pre-U.S. payrolls trade. EUR-USD consolidated around the 1.3600 mark and USD-JPY did likewise around its 105.00 level after lifting moderately during the Tokyo session. GBP-USD dropped to a two-day low of 1.6402, nearly 80 pips down on the London session peak, while EUR-GBP spiked over 30 pips to a two-day peak of 0.8292. U.K. data included production figures that unexpectedly stagnated in November, construction output that fell by the biggest margin in 17 months (of 4%), and the BRC retail sales figure for December that came in shy of expectations. The data joined the already released December PMI surveys to collectively suggest that the U.K. economy isn't sustaining growth momentum as well has had been thought.

[EUR, USD]EUR-USD has recovered to levels around the 1.36 handle after making a six-week low of 1.3548 yesterday following solid U.S. data and dovish ECB press conference. EUR-JPY and EUR-GBP have seen a similar price action. Market activity has been low ahead of today's U.S.. payrolls report. We remain bigger-picture bearish on EUR-USD as we have a dollar bullish view in light of a run of mostly firm U.S. data and in the wake of the Fed's QE tapering decision. There is also the possibility that the ECB might announce fresh stimulus in the coming months. Initial resistance is marked at 1.3620-25 ahead of 1.3668-1.3675, which encompasses both the 20- and 50-day moving averages.

[USD, JPY]USD-JPY rose back toward 105.00 amid modest yen underperformance. The five-year peak of 105.44 remains within striking distance, which we expect to fall in the not too distance future. BoJ member Shirai said this week that it would be possible to aim for the 2.0% inflation target at slower pace, though this didn't stir markets as it has become evident that the objective will take longer than the central bank envisaged last April, when it embarked on this course. We expect this policy will continue to drive the yen to fresh lows during the year. Data this week showed Japan's monetary base surged 46.6% y/y in December to a record Y193.5 tln, illustrating the impact that the BoJ's reflationary policy is having. The BoJ is targeting a monetary base to Y270 tln by the end of 2014.

[GBP, USD]Sterling dove following disappointing U.K. data, with production unexpectedly stagnating in November, construction output falling by its biggest margin in 17 months (of 4%), and the BRC retail sales figure for December falling short of expectations. The data, along with the already released December PMI surveys, collectively suggest that the economy isn't sustaining growth momentum as well has had been thought. This has effectively brought an end to the six-month bull trend sterling had seen. The appreciation of the currency itself has been a brake on export performance. GBP-USD dropped to a two-day low of 1.6402, nearly 80 pips down on the London session peak, while EUR-GBP spiked over 30 pips to a two-day peak of 0.8292. Cable support is marked at 1.6380 (50-day moving average) and 1.6337 (Jan-7 low), resistance at 1.6460 and 1.6480.

[USD, CHF]The CHF has remained on a weaker footing. USD-CHF has scaled back above 0.9100 and EUR-CHF breached above 1.2300 for the first time in a month, up from its pre-Fed tapering decision low of 1.2166, which was the lowest level seen in eight months. This reflects an unwinding in the Swiss currency's safe haven premium as the period of Fed policy uncertainty ended with its decision to commence QE tapering. Resistance comes in at 1.2400, support at 1.2370 and 1.2350.

[USD, CAD]USD-CAD has broken sharply higher this week on a bullish U.S. dollar outlook and weaker Canadian data, underpinned by favourable movement in yield differentials. The pair broke both 1.0700 and 1.0800, taking out its Dec-20 major trend peak of 1.7337 on route. The price action marks a break higher after some pretty choppy price action over the last several of weeks. Resistance can now be expected at 1.0850 and 1.0900. The previous trend peak of 1.0737 and 1.0700 now provide support.